Investors have called on
James Packer
and his
Crown Resorts
management team to turn their attention to ensuring the company’s $1.3 billion Sydney casino and hotel delivers returns for shareholders amid fears the gaming company has paid too much.

The project has been touted as a personal quest for the Sydney-based billionaire who has expressed his wish to build a hotel the city could be proud of.

Perpetual Investments head of equities
Matt Williams
, who controls the largest stake in Crown after Mr Packer, said the recent approval was positive.

“[The] only worry for investors is what level of return this investment will generate," he said. “However, based on management track record, you would have to back them to succeed."

Analysts have begun to question the returns for a project that will not include poker machines and mass-market gaming. Crown plans to spend $1.3 billion building a 60-storey tower in the Barangaroo development precinct on Sydney’s Darling Harbour. The tower will house a six-star hotel, private gaming salons, luxury residential apartments and up to 20,000 square metres of gaming. The venue is expected to have 120 tables when it opens in November 2019.

Approval called a minor negative

Deutsche Bank analyst
Mark Wilson
said he expected the property to generate earnings before interest, tax, depreciation and amortisation of $98 million to $157 million and a pre-tax return on capital of 5.6-11.8 per cent in 2020-21, its first full year of operation. He called the approval a “minor negative" for the company, given these estimates.

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Goldman Sachs analyst
Adam Alexander
said although Crown still had to gain regulatory and planning approvals, the government green light was a significant milestone that would help the company to access the Sydney casino market “that potentially provides another long-term growth driver for the company".

“We remain of the view that the key mission [or] question for the Crown board and management is ensuring that the project earns an adequate return for shareholders," Mr Alexander said in a note. “Our initial modelling suggests return will be slim [with an internal rate of return of 11.4 per cent], with little margin for error during delivery of the project."

Mr Williams agreed Crown had minimal wriggle room to deliver its plan. “But, again, I’d back the Crown management team to outperform," he said.

Neil Boyd-Clark
, managing partner of Crown shareholder Arnhem Investment Management said he was “absolutely" pleased about the company’s approval to develop in Sydney. “The opportunity to expand into a new market that had previously not been available to Crown is welcome," he said.

Perth, Sri Lanka and Brisbane to come

In addition to its Sydney casino, Crown is also building a six-star hotel at its Perth casino and is pursuing government approval to build a $US400 million ($426.86 million) casino and hotel in Sri Lanka. The company has also flagged its interest in building a new gambling, shopping and entertainment complex, which the casino industry terms an “integrated resort", in Brisbane. Mr Boyd-Clark said he was confident Crown could deliver on projects it chose to pursue. “What’s important is that Crown executes on whatever growth opportunities it sees, in a efficient fashion," he said. “We would expect the company to be judicious in the way it spends capital.

“It’s going to be up to the individuals running Crown to decide what the company can manage in the way of growth," he said. “Up to this point they have demonstrated a very robust capability in terms of delivering on growth projects."

Crown shares were up in early trading but closed down 0.6 per cent to $16.53, marginally down from a 12-month high of $17.15 in October.